Author Topic: Case Study - investing from Europe  (Read 2500 times)

m.k.

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Case Study - investing from Europe
« on: January 04, 2020, 06:46:48 PM »
Hello!

I am a graduate student from Croatia, Europe. Recently, I have found out about the FI movement. I was really excited to start planning my savings and investing by listening to advice from FI blogs, podcasts, books, etc. However, all advice is centered around Vanguard and US citizens (or UK citizens).

I am lucky enough to not have any debt (Croatia education is free) and am currently receiving scholarships monthly (80,000 yen and 24,000 yen) for my graduate research in Japan, where I currently reside.

My problem, however, is with the fact that all FI advice is about Vanguard and the US (and the UK) citizens. I cannot find any good advice on the Internet or in books about where to invest and how, if I am from Europe and have no access to Vanguard (or do I?)

So I am writing here in hopes there are some European citizens with experience. I know that here in Japan there are some companies through which you can invest in Vanguard etc., but since I am leaving in September of 2020, I don't know if it's worth it to invest 10,000 yen every month for a few months and then close the account..

Anyway, I am finishing grad school next year and hopefully getting a job. Until then, I am trying to figure out the best way to save and invest. But as I said, investing is a big concern for me since everything anyone is ever talking about is Vanguard.

So my question is, are there any companies where I can invest in Vanguard although I am a Croatian citizen? Also, what are some good alternatives and what do you use?


-M.K.

gd

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Re: Case Study - investing from Europe
« Reply #1 on: January 06, 2020, 12:54:09 PM »
Hi! Though I'm Dutch and not Croatian, I can share a bit what I decided to do after I started reading more about FI in the last few months.

I started out with reading the blog (and later on the book) from JL Collins, and noticed the exact same thing that you mentioned: as a European citizen we don't seem to have (easy) access to Vanguard Index Funds. In a guest blog post [1] on JL Collins website, Mrs. Econowiser addresses this a bit and I recommend reading her post.

Since I also cannot invest in Vanguard directly, I decided to buy Vanguard S&P500 ETFs through a broker instead. Finding the right broker was not so easy, since I have the feeling that there are many brokers out there that try to rip you off. I looked for the one with the lowest costs. I decided in the end to go with a broker called DeGiro and opened a Custody account there. At this broker, I can execute one trade per month without transaction costs, which I do to buy ETFs on a monthly basis with a part of my salary. Since Vanguard S&P500 ETF is traded at the Euronext Stock Exchange in Amsterdam, I also don't have to pay an 'exchange connectivity fee'. I do have to pay a 3% commission fee on dividends unfortunately.

Also, I'm actually in a similar situation like you. I'm temporarily working in Singapore and will go back to Europe later this year. For this reason, I decided to exchange my Singapore dollars and do my investments in Euro' (I make use of TransferWise for exchanging dollars to euro's).

Hope this helps!

[1]: https://jlcollinsnh.com/2014/01/27/stocks-part-xxi-investing-with-vanguard-for-europeans/

m.k.

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Re: Case Study - investing from Europe
« Reply #2 on: January 07, 2020, 10:00:32 PM »
I've already read that post, yes. Thank you!

I guess my biggest concern is whether it's worth investing at all when there are so many variables to consider. Money exchange needs a commission, taxes take away the gain, a broker needs a commission, etc. In the end, is the return even worth it?

MrThatsDifferent

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Re: Case Study - investing from Europe
« Reply #3 on: January 07, 2020, 10:47:32 PM »
This isn’t really a case study, maybe post in the investor section?

efree

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Re: Case Study - investing from Europe
« Reply #4 on: January 07, 2020, 11:11:03 PM »
I live in one of the Baltic countries and I use ETFmatic for my stocks. I think it's great because I don't have to do anything myself, all the investing happens automatically.

I would also suggest that you look at P2P lending platforms, which there are a lot in Europe. I have more than 60% of my investments in those.

habanero

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Re: Case Study - investing from Europe
« Reply #5 on: January 19, 2020, 02:06:10 PM »
Its not a problem to invest from Europe or anywhere else. Low-cost global index funds are available everywhere. They might not be as cheap as Vanguard but not that much more expensive. I pay .18% for the one I use (global equities). If I want US only it costs .2 %. The major concern from someone living in a small country is the FX risk. If you buy a global index fund most of your assets are in foreign currency (USD, EUR, JPY, GBP, etc) while most of your expenses are in your local currency in the country where you live. And FX rates can move a lot. Some expenses are directly or indirectly dependent on currency rates (travel abroad, imported goods) so I have decided for myself that I keep a rouglhy 50-50 allocation to hedged and non-hedged index funds. And you should avoid having a lot of equity exposure to your home country - if you live a place, own your house, work etc you have more than enough domestic exposure. It's very common to have way too high equity allocation to your home country - for small economies this generally mean a lot of exposure to specific sectors (oil, gas and seafood for me as a Norwegian for example). It's ok in the US (over 60% of the world's equity market anyway) but not anywhere else. Even largish countries like Australia and Canada are only 2-3% of the world's markets.

And if you buy bond funds you need them FX hedged, otherwise they make little to no sense. If you own a non-hedged bond fund the returns will be completely dominated by FX movements so they won't provide the stability you want them for.

And never forget that early in your career your largest asset by far is the value of your future income from work. That is also your biggest risk early on - to loose the ability to earn good money. Once your investments are large this risk is much lower as your portfolio is likely to provide a very big cushion should something bad happen.